MANAGEMENT RESEARCH PROJECT

REPORT

On

(Rural Marketing)

MANAGEMENT RESEARCH PROJECT

REPORT

On

(Rural Marketing)

Table of Contents

1. ABSTRACT7

2. INTRODUCTION8

3. OBJECTIVE OF THE PROJECT10

5. METHODOLOGY11

a) Research Design11

b) Method of data Collection11

6. RURAL MARKETING11

6.1 RURAL MARKETING11

6.2 DIAGNOSIS OF THE FAILURES13

6.3 ATTRACTIVENESS OF RURAL MARKET16

6.4 RURAL V/s URBAN MARKETING19

6.5 DIFFERENCES IN URBAN-RURAL MARKET RESEARCH20

6.6 SELECTING & ATTRACTING NEW MARKETS21

6.7 PRICING22

Pricing Frame-Work23

Cost-based Methods24

Competition Based Pricing Methods24

Demand-based pricing Methods25

Price in Marketing Mix26

Skimming Vs Penetration Strategies26

7. PROMOTIONAL STRATEGY27

EXPLORING MEDIA27

DESIGNING RIGHT PROMOTION STRATEGY28

7.1 DESIGNING PROMOTION29

(a) Communication objectives:29

(b) Message content:30

(c) Message structure30

(d) Message format:31

(e) Message source:31

(f) Selecting the Channels:32

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Personal Channels32

Distribute products for interaction33

Create Opinion leaders33

Advertising with interactivity34

Train middlemen34

Tele links for online transaction35

Non-Persona, Channels35

(g) Deciding on Promotion Mix36

(i) Contests and Demonstrations:36

(ii) Sampling:36

(iii) Installment Schemes:37

7.3 DISTRIBUTION STRATEGY38

7.4 THE OLD SETUP39

1. Wholesalers:39

2. Retailers39

3. Vans41

4. Weekly Haats & Bazaars41

5. Melas and Fairs42

7.5 THE NEW PLAYERS43

1. Unofficial Channels43

2. Cooperative Society43

3. Public Distribution System (PDS)44

4. Petrol Pumps44

5. Agricultural Input Dealers44

6. NGOs44

7. Barefoot Salesmen45

8. Syndicated Distribution45

7.6 NEW APPROACHES46

1. Distribution Trends46

2. Direct To Home Selling46

3. Relationship Marketing47

8. PRODUCT STRATEGY49

(i) Based on Tangibility49

(ii) Based on the purpose of use49

(iii) Basedonthefunctionallifeoftheproduct49

(iv) Based on habits50

(v) Based on the price and quality50

(vi) Based on product development51

(vii) Based on brand hierarchy level51

8.1 CONCEPT AND SIGNIFICANCE OF PRODUCT STRATEGY52

(i) Achieves Product Market Fit: -52

(ii) Encourages Innovativeness: -52

(iii) Provides Competitive Edge: -52

(iv) Makes Better Use Of Resources: -52

1. Length of product line: -54

2. Line Pruning: -55

3. Line Modernization: -55

CASE STUDIES57

COCA COLA INDIA57

TATA SALT59

COLGATE62

CASPER64

9. CONCLUSION67

10. REFERENCES69

1. ABSTRACT

Rural Markets have seen a big boom in terms of opportunities they provide to the corporate sector in India. Rural India had a share of over 55 per cent in total consumption of FMCGs (Fast Moving Consumer Goods), and had a growth of about 14 per cent per annum during the period 1992-93 to 1997-98. This seems to be a fairly good growth by any standard. The rural markets contribution to the total national market had gone up from 28 per cent in 1985 to 40 per cent in 1990. The size of rural market in 1992 was of the order of Rs. 40,000 crores, made-up of Rs. 22,000 crores for non-food items and Rs. 18,000 crores for food items. During the period 1992-93 to 1997-98 consumption of FMCGs had grown at a rate of 14 per cent per annum.

According to data furnished by National Council for Applied Economic Research (NCAER) clearly showed a great rural market boom. The Chief Economist of NCAER (based on this data) clarified that rural growth rates have already outpaced urban ones and will continue to do so through the next decade. So, a presence in the rural market will not remain a choice, but a necessity. The companies will have no choice but to go rural if they must survive. Findings of the study conducted by NCAER in1998-99 showed that, (i) Rural markets for group I durables (less than Rs. 1000 in value: items like transistors, pressure cookers, wrist-watches, bicycles, etc.) are bigger than urban markets already; predicted that (ii) rural markets for group II durables (Rs. 1001- Rs. 6000 in value: items like B&W TVs, sewing machines, mixers, cassette recorders) will be bigger than urban markets by 2001-02; (iii) for group III durables (Rs. 6001 or more in value: like color TVs, refrigerators two-wheelers and washing machines) rural markets will be smaller than urban ones, even in 2012-13; and showed that (iv) rural market growth rates are faster than urban ones, even on the larger bases of group I & II. The NCAER data also showed that India is now seeing a dramatic shift towards prosperity in rural households. It predicted that the lowest income class will shrink from more than 60% in1994-95 to 20% in 2012-13. The higher income classes will be more than double. Rural economy has triggered. Ten good rains in a row from 1980-81 to have 1998-99) boosted food grain production. Procurement prices have also been rising. This implies growing rural prosperity and demand for goods. The NCAER data clearly showed that Rural FMCG (Fast

Moving Consumer Goods) market will boom.

Some impressive facts about rural sector:

I. The number of rural supermarkets (haats) in India 42,000 exceeds the total number of retail chain stores in the US (35,000).

II. In 2012-13, LIC sold 55 percent of its policies in rural India.

III. Of the two million BSNL mobile phone connections, 50 per cent are in rural

IV.Of the 20 million who have signed up for Rediffmail, 60 per cent are from small towns. Of the one lakh who have transacted on Rediff online shopping site, 50 per cent are from small towns.

V. 24 million Kisan Credit Cards (KCC) issued in rural areas exceeds the 17.7 million credit

plus debit cards issued in urban India. A whopping Rs. 52,000 crore has been sanctioned under the KCC scheme.

VI.The number of middle and higher income families (Having Rs. 70,000 plus annual income) in rural (21.7 million) and urban (24.2 million) is nearly the same.

2. INTRODUCTION

The footfalls in the villages are getting louder and louder as companies scramble to woo the rural consumers. Villages are no longer an abstraction, but fashionable in marketing terms. From talking endlessly about potential growth, companies are now actively cultivating the rural markets. And why not?

Consider the market; out of five lakh villages in India only one lakh have been tapped so far. What has made the rural consumers so attractive to companies now? After all, the 122-million village households were not created overnight.

The answer is simple. The urban market is getting saturated while villagers are flush with 'disposable income' thanks to bountiful harvests in the last four years. It is this income that the companies are raring to cash in on. The estimate speaks of the potential volume of business that can be generated in rural Indian markets. The estimate is about three times that of the European market.

8 | M a k i n g I n r o a d s I n t o H i n t e r l a n d

Hindustan Lever's 'Operation Bharat' will reach 22 million new households in the villages by the end of the year.

Every area that has a police station will soon boast a Godrej dealer & service center.

BPL is planning to add 13,000 active dealers this year to its existing network of 15,000 throughout the country.

A dramatic change is in progress. Villagers who used to crack open peanut candies, eat the nut and throw away the shell are now demanding chocolate candies that will melt in their mouths, not in their hands. Charcoal-cleaned teeth are a rare sight; so is the case with twigs of niim

(neem) and babul (babool) tree. Today, the ultra bright shine of Colgate or some other international brand of toothpaste holds more appeal than the traditional methods of cleaning teeth. Even the native expressions of cleaning teeth, such as daatun karnaa and musaag laganaa, are endangered to being replaced by new expressions such as paste karnaa, 'to brush teeth with paste'. Even a simple query such as Where are you from? is not free from the overtones of marketization and globalization in rural discourse. Consumerism and globalization is invading parts of India where, as some would venture to say, time seems to have ceased for centuries. Yet there has not been substantial progress in this area.

It can be seen that now 73% of Indias total population is rural. Though over the last decade, there has been a marginal reduction in the rural population expressed as a percentage of total population, there has been a steady growth in rural population in terms of absolute numbers. And, it had reached 74 crore by 2001. In terms of households, the rural market consists of more than 12 crore households, forming over 70 per cent of the total households in the country.

Urban population in India is concentrated in 3200 cities and towns whereas the rural population is scattered across 630,000 villages. Even the FMCG giant, HLL, directly reaches only 70,000 villages of the country. This goes to prove that the rural market is scattered over a large area and is very difficult to penetrate.

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Nearly 60 % of the rural income comes from agriculture. Hence rural prosperity and disposable income with rural consumers is linked largely with agriculture. 50 % of the households in the rural economy are in the income category of less than Rs. 25000 per annum, but about 14% of the households have an annual income that exceeds Rs. 50,000.

The rate of growth of the rural market segment is however not the only factor that has driven marketing managers to go rural. The other compelling factor is the fact that the urban markets are becoming increasingly complex, competitive and saturated.

The policies of the government largely favor rural development programs. This is clearly highlighted by the fact that the outlay for rural development has risen from Rs 14000 crore in the 7th plan to Rs 30000 crore in the 8th plan period. In addition, better procurement prices fixed for the various crops and better yields due to many research programs have also contributed to the strengthening of the rural markets. This attraction towards the rural markets is primarily due to the enormous variation in the demands of approximately 740 million rural people. Thus, with the rural markets bulging in both size and volume, any marketing manager will be missing a great potential opportunity if he does not go rural.

'Rural markets are future battlegrounds'

3. OBJECTIVE OF THE PROJECT

"Any task without sound objectives is like Tree without roots". Similarly in case of any research study undertaken, initially the objectives of the same are determined and accordingly the further steps are taken on.

A research study may have many objectives but all these objectives revolve around one major objective which is the focus of the study.

In this study, the focus is on the emergence of rural markets as the most happening market on which every marketer has an eye. And so this study will be based on studying the emergence of rural market in various contexts. The following are the objectives of this research study:-

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To study the emergence of rural markets in the context of India.

To study the present scenario of rural marketing in India.

To study the role of advertisement in rural India.

To study the constraints in marketing communication in rural India.

To study the future prospects of rural markets.

To study the challenges faced by rural marketers in India.

To study the reasons of popularity of rural markets in India.

5. METHODOLOGY

a) Research Design: On the basis of fundamental objectives of research, our study is a type of

Descriptive Research: Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. Descriptive research answers the questions who, what, where, when and how.

Although the data description is factual, accurate and systematic, the research cannot describe what caused a situation. Thus, descriptive research cannot be used to create a causal relationship, where one variable affects another. The objective of my research is to describe things such as the market potential for a product or the demographics and attitude of rural consumer who buy the product.

b) Method of data Collection

Secondary Data: Large amount of secondary data is available in the forms of articles, manuals and previously conducted researches on the similar topic. Also, the data thus gathered will help in identifying key parameters to examine through further exploration and thus will help in defining the objectives.

6. RURAL MARKETING

6.1 RURAL MARKETING

Quite clearly, large Indian companies have begun looking at rural markets seriously. Some of them are even developing exclusive marketing strategies to tap this huge mass of consumers.

Of India's one billion plus population, nearly 70 per cent live in non-urban or rural areas. According to a National Council for Applied Economic Research (NCAER) study, there are as many "middle income and above" households in rural areas as there are in urban areas. There are almost twice as many "lower middle income" households in rural areas as in urban. According to NCAER's projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In Urban India, the same is expected to grow from 46 million to 59 million. Hence the absolute size of middle and high income households in Rural India is expected to be nearly double that of Urban India.

Percentage Distribution of household, population and income

HOUSEHOLDSPOPULATIONINCOME

RURAL73.674.655.6

URBAN27.425.444.4

ALL INDIA100100100

Thus we see that Rural India contributes almost 56% to the National Income as against 44% contributed by Urban India. Although it is contributed by 75% of the total population, which has its own challenges like how to sell small quantities to large base of consumers.

Percentage Of Population Below Poverty Line By Rural-Urban Location State Wise (1999-2000)

STATESRURALURBAN

ALL-INDIA36.3528.76

ANDHRA PRADESH25.4832.28

ASSAM61.7812.48

BIHAR58.8545.10

GUJARAT26.2221.70

HARYANA14.8613.79

KARNATAKA38.5024.55

KERALA26.5031.89

MADHYA PRADESH39.3546.29

MAHARASTRA50.0032.16

ORISSA62.6734.27

PUNJAB14.246.74

RAJASTHAN15.0124.36

TAMIL NADU39.3729.82

TELANGANA29.8736.39

WEST BENGAL55.1616.74

Thus the Situation has further worsened as per the Report on Human Development Index.

6.2 DIAGNOSIS OF THE FAILURES

The apparent disparity requires introspection to identify the gaps, which can then be bridged between rural & urban India.

a) Relative share (%) against GDP

Sector1950-511995-96

Agriculture5629

Manufacturing1529

Transport & Trade1120

Banking911

Administration (Services)911

Growth rates in different sectors of economy

Particulars1990-9191-9292-9394-95

GrowthIn Real GDP %5.21.14.34.3

GrowthIn Agriculture Production %3.0-1.92.92.9

GrowthIn Industrial Production %8.30.62.34.1

b) Subsistence Orientation of Agriculture

I. Productivity is low

AI. Land degradation

c) Failure of Land Reforms

I. Failure of redistribution of land in favor of poor.

AI. Large numbers of workers dependent on agriculture leading to low labor productivity.

BI. Splitting of families and rise in population has shrunk the size of operational land holding.

IV.Landlessness is increasing forcing more and more people joining labor market

every year.

d) Inadequate Food Supplies

I. At national level India is self-sufficient but inadequate at the household level.

AI. Increase in food production mainly due to few crops like wheat & rice but production of bajra, barley etc has declined considerably (as these are the corps used by poor in rural India).

e) Slow Growth of Infrastructure

I. Still 40% of Indias villages are without proper roads.

AI. 1.8 Lac villages do not have primary schools within 1 km.

BI. 4.5 Lac villages have drinking water problem.

f) Inadequate Inputs

I. Research extension systems are weak, no direct link between scientists and

farmers.

AI. Problems faced in the timely availability of improved seeds, fertilizers and pesticides in required quantity.

BI. Credit is major constraint, which adversely affects adoption of new technologies especially by the small farmers.

g) Slow Down Of Rural Industrialization

The rural industrialization has slowed down although the expenditure on rural industries

increased from Rs.42/- crores (1st plan) to Rs.6334/- crores (8th plan). However %age of allocation decreased from 2.1% to 1.6%.

Plan outlay on rural industrialization (Rs. Crore)

PUBLIC SECTORRURAL

PLANOUTLAYINDUSTRY%

I1960422.1

II46721874.0

III85772412.8

IV157792931.9

V394265921.5

VI9750017801.8

VII18000027531.5

VIII43410063341.6

Rural Marketing: A silent revolution is sweeping the Indian countryside. It has compelled marketing whizkids to go rural. The marketing battlefield has shifted from the cities to the villages. Go Rural seems to be the latest slogan.

Adi Godrej of Godrej soaps says:

The rural consumer is discerning and the rural market is vibrant. At the current rate of growth it will soon outstrip the urban market. The rural market is not sleeping any longer.

C. K. Prahlad, the management guru observes:

Selling to the poor may be more profitable than selling to you and me. This is where the future is. Opportunities are everywhere. The digital divide is not about lack of opportunity, it is about the lack of imagination.

Evolution of Rural Marketing

MAJORSOURCEDESTINATION

PHASEORIGINFUNCTIONPRODUCTSMARKETMARKET

IBeforeAgriculturalAgriculturalRuralUrban

Mid-1960MarketingProduce

Mid-Marketing OfAgricultural

IIUrbanRural

SixtiesAgriculturalInputs

Inputs

Mid-RuralConsumables AndUrban

IIIRural

NinetiesMarketingDurables ForRural

Consumption

6.3 ATTRACTIVENESS OF RURAL MARKET

1) Large population

2) Rising propensity

3) Growth in consumption

4) Life cycle changes

5) Life cycle advantages

6) Market growth rate higher than urban

7) Rural marketing is not expensive

8) Remoteness is no longer a problem

1. Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians.

2. Rising Rural Propensity:

Income Group1994-952000-012012-13

Above Rs. 100,0001.6%3.8%5.6%

Rs. 77,001-100,0002.7%4.7%5.8%

Rs. 50,001-77,0008.3%13.0%22.4%

Rs. 25,001-50,00026.0%41.1%44.6%

Rs.25,000 & Below61.4%37.4%20.2%

3. Growth in consumption:

Per Capita Household Expenditure (Rs.)

LevelNo.StatesExpenditure

Punjab614

Kerala604

HighHaryana546

(Above Rs 382/-)7

Rajasthan452

Gujarat416

Andhra Pradesh386

Maharashtra384

West Bengal382

AverageOrissa381

(Rs. 382/-)5Tamil Naidu381

Telangana373

Karnataka365

Assam338

3

LowMadhya Pradesh326

(Below Rs. 382/-)

Bihar289

4. Life style changes:

Income vs. usage of packed consumer goods (% of household using)

Monthly Household Income (Rs.)

GoodsUp to 350351 750751 15001501 +

Washing Bars60788691

Toilet Soaps57728993

Tooth Paste/Powder22366585

Talcum Powder20254163

Tea Packaged22304864

This shows how consumption is increasing with increase in income level.

5. Life cycle Advantage:

Stages in Life Cycle

ProductUrbanMarket Growth Rate %Rural

Popular soapsMaturity2Growth

Premium soapsLate growth11Early

Washing powderLate growth6Early

Skin creamsMaturity1.1Growth

Talcum powderMaturity4Growth

6. Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil.

7. Rural marketing is not expensive: Conventional wisdom dictates that since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. This includes the expenses of advertising in vernacular newspapers, television spots, in- cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area.

8. Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons,

Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and

Lack of marketers imagination and initiative.

Marketers have so far, failed in analyzing the rural side and exploiting rural Indias traditional selling system- Haats & Melas. Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of these two outlets.

6.4 RURAL V/s URBAN MARKETING

NO.ASPECTURBANRURAL

Marketing & SocietalMarketing & Societal Concepts,

1PHILOSOPHYConcepts & RelationshipDevelopment Marketing &

MarketingRelationship Marketing

MARKET

DEMANDHighLow

COMPETITIONAmong Units InMostly From

2LOCATIONConcentratedWidely Spread

LITERACYHighLow

INCOMEHighLow

EXPENDITUREPlanned, EvenSeasonal, Variation

NEEDSHigh LevelLow Level

INNOVATION/ADOPTIONFasterSlow

PRODUCT

AWARENESSHighLow

CONCEPTKnownLess Known

3POSITIONINGEasyDifficult

USAGE METHODEasily GraspedDifficult To Grasp

QUALITY PREFERENCEGoodModerate

4PRICE

SENSITIVEYesVery much

LEVEL DESIREDMedium-highMedium-low

DISTRIBUTION

Wholesalers, stockists,Village shops,

CHANNELSretailer, supermarket,Haats

5specialty stores, &

authorised showrooms

TRANSPORT FACILITIESGoodAverage

PRODUCT AVAILABILITYHighLimited

PROMOTION

Print, audio visual media,TV, radio, print media to some

ADVERTISINGoutdoors, exhibitions etc.extent. More languages

few languages

6

Door-to-door, frequentlyOccasionally

Contests, gifts, priceGifts, price discounts

discount

PUBLICITYGood opportunitiesLess opportunities

6.5 DIFFERENCES IN URBAN-RURAL MARKET RESEARCH

ASPECTURBANRURAL

Literate, brand aware,Semiliterate or illiterate, brand unaware,

individual responddifficult to get individual responses,

RESPONDENTSindividuallygenerally group responses

Willing to respond, have time

TIMEpressures, spares little time forHesitant but devotes time.

researcher

Tough to access: Geographical

ACCESSIBILITYEasy to access, though manydistances and psychological

suffer from research fatigueapprehension are barriers

Do not speak to outsiders easily

SECONDARY DATAInternal data, syndicate

research, published media,Very few sources and less data

SOURCEmany sources and large data

PRIMARY DATALarge number of middlemen,

experts, sales force,Less number of all categories

SOURCESconsumers opinion leaders

Respondents form relativelyHeterogeneous groups. Income and

homogenous group. Income

SAMPLINGland holding be carefully applied

can be a criterion

Use of sophisticated

instruments, style andRequires simplified instruments.

DATA COLLECTIONadmiration.Respondents comfortable with colors

Respondents comfortable& pictures.

with numbers ratings.

6.6 SELECTING & ATTRACTING NEW MARKETS

Selecting and attracting markets involves three decisions viz., segmenting, targeting

and positioning.

I. Segmentation is the process of dividing or categorizing market into different groups based on one or more variables.

AI. Targeting is selecting the market segment, which can be served efficiently and profitably. It is deciding on market coverage strategy.

BI. Positioning is a market attraction strategy, which involves placing the brand in the minds of the customers in the target market.

The various steps included in the market coverage and attraction process are:

DECISIONACTIONS

SEGMENTATIONIdentification of various bases for segmenting the market.

Developing profiles of the marketing segments.

TARGETINGEvaluating the market segment for their attractiveness.

Deciding the market coverage strategy

POSITIONINGIdentifying a set of possible competitive advantages of the brand

Selecting the right competitive advantage

Communicating the chosen competitive advantage to the target customers

Segmentation is the process of identifying & establishing alternative market segments. Next step that is targeting involves is evaluation, selection & coverage. Evaluation of segments (following criteria may be applied):

A. Profitability - relevant information required is:

a. Sales volume

b. Distribution cost

c. Promotion cost

d. Sales revenue

e. Profit margins

B. Attractiveness

C. Growth rate

D. Company objectives

Selection of segments

Coverage of segments

SegmentationType Of MarketingCoverage Strategy

ZeroMassUndifferentiated

SubstantialSegmentedDifferentiated

SelectiveNicheConcentrated

Choosing a Coverage Strategy

VARIABLESTRATEGY

UNDIFFERENTIATEDDIFFERENTIATEDCONCENTRATED

RESOURCESModerateLargeLimited

PRODUCT VARIABILITYLessMoreLess

PRODUCT LIFE CYCLE STAGEIntroductionGrowthIntroduction

MARKET VIABILITYLessHighHigh

Positioning

Positioning is the act of finding a place in the minds of consumers and locating a brand therein.

Positioning involves:

I. Identifying the difference of the offer vis--vis competitors offer. II. Selecting the differences that have greater competitive advantage. III. Communicating such advantages effectively to the target audience.

6.7 PRICING

Among the four As of rural marketing viz.

Affordability

Availability

Awareness

Acceptabilit

Affordability is the major determinant of consumption.

Affordability is determined by two factors

o Incomes of the consumero Prices of the products or services

Pricing Frame-Work

S.No.SituationMajor FactorsApproachMethod

1New Product introductionDemandCost-orientedCost-plus or mark-

-ElasticDemand-orientedup, Penetration,

-InelasticSkimming

2Product-life cycle (short)Cost DemandCost-orientedPayback/capital

Competitionrecovery,

Rate of return

3Growing marketsCostCost-orientedCost plus, mark-up

Experience curve

4Mature marketsCompetitionCompetition-Leader pricing,

Stiff competitionorientedCompetitive pricing

(bidding),

Going rate pricing

5Growing/mature markets.DemandDemand-orientedDiscriminatory,

Discerning buyersDifferential,

Perceived value,

Psychological,

Value pricing

6Product-mix promotionDemand CostDemand-orientedProduct-line,

CompetitionOptional feature,

ImageCaptive product,

Two-part,

Product bundling

7Distribution to scatteredGeographicalCost-orientedGeographical

CustomersCostpricing

8Motivating channelCompetitionCompetition-Discount pricing

Channeloriented

members

Approaches to pricing would be based on one or more of the following bases:

1 Cost 2 Competition 3 Demand

Various methods of pricing are discussed in the following tables:

Cost-based Methods

MethodDescription

Cost-plus or Mark-upAll associated costs of production are

computed. Prices are fixed by making up a

fixed percentage over average or marginal

costs.

Marginal cost or ContributionPrice is determined to recover marginal cost

and make a contribution to the firm.

Target returnPrices are set in anticipation of earning a

desired target return on investment.

Pay back method (capital recovery)Price is determined to enable the firm to

Cover all costs and capital investment within a

specific time period.

Experience curveAn experience curve represents the relationship

between costs and cumulative experience. With

learning, costs decline and allow fixation of

lower prices.

Competition Based Pricing Methods

MethodDescription

Leader pricingSome product items may be priced low, to

attract customers andtogeneratemore

overall demand for other items.

Competitive pricingIt matches the market prices of competitors. It is

reactive.

Going rate pricing (Follow the crowd/leader)Firm prices its products at the same level or

below the prices of leading competitors.

Sealed bid pricingIn industrial marketing, open or closed bids are

invited. Firmsquotetheirprices,

anticipating what the competitor would quote.

Demand-based pricing Methods

MethodDescription

Discrimination / Differential / Variable /Products are sold at two or more prices based on

Flexiblecustomer segment, product-form, image,

location and time.

Perceived-valueBased on perceived value of each component of

the product, the price is estimated and

employed.

PsychologicalBased on attitudes of consumers in quality-

price relationship, (high price indicates high quality)

odd prices (convey the notation of a discount or

bargain) and reference (a price on an average

consideredright fora product),pricesare

determined.

ValuePricing t ogeneratevaluesatisfactionto

consumers.Every Day Low Pricing (EDPL)

charges low prices on all days . High-low

pricing charges higher prices on ever day

basis butlowerpricesduringspecial

promotion period.

Pricing strategy has to pass through three tests of effectiveness

I. Is it in tune with the expectations of customer?

II. Is it consistent with other Ps of marketing strategy?

III. Is it competitive enough to give the target market share?

Consumer Categories (Rural C o ns u m e r )

CategoryAnnual IncomeLife Style

Quality consciousOver Rs. 1,50,001Very rich

Value consciousRs. 45,001 1,50,000Consuming class

Price ConsciousRs. 22,001 Rs. 45,000Climbers

Rs. 16,001 Rs. 22,000Aspirants

Below Rs. 16,000Destitute

Price in Marketing Mix

S.No.Rural ConsumersProductPricePromotionPlace

1.Quality conscious,PremiumHighHighShow rooms, Malls,

Concerned withProducthyper General and

Functional benefits,Fancy stores

Value for money

2.Value consciousMassMediumHighGeneral and fancy

Price sensitive,Productstores, super

Concern formarkets, Kirana,

Functional benefitspaan shops and

No frills. Value for moneyHaats.

3.Price consciousSpuriousLowNoKirana, paan shops

No concern for qualityProductsand Haats

Skimming Vs Penetration Strategies

FactorSkimming Use if:Penetration Use if:

Price elasticity of primary demandInelasticElastic

Price elasticity of selective demandInelasticElastic

Cost of production and marketingHigherLower

relative to potential competitors

Economies of ScaleNoYes

Ease with which competitors willDifficult for them toEasy entry

enter the marketenter

Rate at which the consumer willNew concept (slow)Known concept (fast)

accept the concept

Market segments based on priceExist. Can be taken oneMass market exits

segment at a time

The firms resources to produce andSmall or restrictedLarge

market product

7. PROMOTIONAL STRATEGY

Promotion has become the biggest challenge, to rural marketers today.

Rural marketers have to skillfully communicate with a much larger but scattered audience characterized by variations in language, culture and lifestyles.

Poor message comprehension and low media exposure only add to the problem of communication through mass media.

The requirement is three folds:

1. To explore the available media at the different locations.

2. To develop region-specific consumer profiles to understand the characteristics of target market.

3. To design right communication and motivation strategies to induce target audience to buy the product.

EXPLORING MEDIA

Promotion media may be classified broadly into three categories: Mass media, local

media and personalized media. The various media vehicles are given below.

Mass MediaLocal MediaPersonalized Media

RadioHaats, Melas, FairsDirect Communication

CinemaWall PaintingsDealers

PressHoardingsSales Persons

TVLeaflets VideoResearchers

Vans Folk

Media Animal

Parade Transit

Mass media like TV are gaining ground in the rural market through regional channels but one cannot deny the importance of the Local and Personalized media.

With the low cost of Local media and its effectiveness it is gaining importance in the rural markets.

DESIGNING RIGHT PROMOTION STRATEGY

In designing the right promotion, the considerations are:

ApproachSame or different

Design(i) MessageRational or emotional or moral

(ii) MediaMass, local, customized one-to-one

(iii) CommunicationsAdvertising, sales promotion, publicity and

personal selling.

Budget allocationMedia mix

Approach: Same or Different?

The controversy regarding the validity of a universal approach to attract urban and rural consumers may continue for some years to come. Until all the rural areas are almost equally urbanized, marketers have to pay heed to the voice of experts. Based on its survey findings, A.P. Lintas advocates:

In mass media, a different idiom for rural India is not required. The chasm between rural and urban India is narrowing.

Ogilvy Rural Communication Network (ORCN) considers rural specific promotion is necessary.

Advertisements for the rural markets must be relevant to those markets if they are to create brand awareness and penetration. For advertisements to succeed, companies have to adopt the principle of multi-national companies i.e., think global and act local.

These two viewpoints are valid, as they represent two different markets of evolving rural markets. It is for the individual marketing manager to find out the applicability of the views. When we observe the practices of leading consumer companies, we find that they are following a more localized and personalized approach in the selection of media and designing

of messages. The time has perhaps come for advertising agencies to look into issues specific to the regions and also at the products, to succeed in the large rural markets.

7.1 DESIGNING PROMOTION

Theprocess of designing promotion mix with appropriate message, media and

promotions is not an easy task. It involves the following steps.

a) Determining communication objectives.

b) Creating message content or appeals.

c) Evolving message structure.

d) Developing message format.

e) Choosing message source.

f) Selecting the channel.

g) Deciding on promotion mix.

h) Establishing promotion budget.

(a) Communication objectives: After analyzing the characteristics of target audience and identifying available media, the next step is Setting Communication objectives. The market may seek one or more of the following objectives.

1. To achieve awareness among a certain percentage of target audience.

2. To improve product knowledge among target customers.

3. To strengthen liking or preference to buy the product.

4. To persuade the consumers to buy the product.

In urban markets the emphasis is on brand switching and promoting more usage. But in the rural markets, many companies are rightly emphasizing on brand awareness building objective. This is the route for more and regular sales according to HLL, Philips, Godrej and Dabur.

In 1990, TVS launched TVS-50 XL as a value-for-money vehicle. This venture was supported by massive advertising campaigns on television to increase awareness of the brand. By then, many villages had TV and TVS spent around Rs.1.5 crore on the Namma Ooru Vandi (our own vehicle) commercial which showed people from various walks of life swearing by TVS-50 XL.

(b) Message content: Messages are to be created to induce, inform and persuade target audience . There should be a theme, an appeal or a unique selling proposition (USP) touching the heart and stimulating the mind. There are three types of appeals: rational, emotional and moral. They are briefly explained and illustrated in the following table:

APPEALASPECTSEXAMPLES

RationalBenefits: Quality, value,Hero Honda Fill it, shut it. Forget it. Three

performance, etc.rose tea: color, taste and flavor

EmotionalPositive: humor, love, pride and joyPrestige pressure cooker: Those who love

their wife cannot say no to Prestige

Negative: Fear, guilt, and shameOnida: Neighbors envy, owners pride

MoralRight behavior, social causesAids campaign. Fight cancer

(c) Message structure: The arrangement of the message in an appropriate order for presentation is as important as message formulation. The message is structured by words sentences and paragraphs. It can be: Tall or short

Linear or non-linear

Tall structures become essential when a marketer desires to explain the product benefits or company's standing on an issue. Generally, for product promotion short structures with brief messages will be more effective. In the case of rural, pictorial presentations make better impact than verbal descriptions, since their ability to read and understand is limited. Linear stories work well with rural consumers unlike urban consumers, they cannot process non-linear messages. Simple logic, sequential ordering of thoughts, easy to understand arguments and clearly drawn conclusions, are essential to make communication

effective.

(d) Message format: The components of the message and their presentation are important

aspects in messagedesign. Different media provide different opportunities to format

the messages.

MediaFormat aspects

Print adHeadline, copy, illustration and color Radio

Words, voice quality and vocalization

TV/PersonWords, voice quality, vocalization and body Language

Pictures, dramatizing voices, attractive expressions and color have more influence on rural consumers.

(e) Message source: If both, the person delivering the ~ and the message are credible the message will achieve the objectives set for it. As such, marketers not only make efforts to create appropriate messages but also try to choose attractive, popular or expert sources. The credibility of a source is determined by three factors. Expertise

Trustworthiness

Likability

The Table below illustrates the use of celebrities, professionals, common persons or elderly persons to endorse the products.

BRANDCELEBRITYCHARACTERISTICIMAGE

Agni teaSrideviAttractivenessEnergy

HorlicksCouple, elderlyTrustworthinessDependable

TeaUstadExpertiseSkilled

(f) Selecting the Channels: Communication channels are of two types: personal and non-personal. Mass communication is to be seen as a two-step-flow -of communication process. Messages of marketer's flow from mass media (TV, press, and radio) to people who are exposed to them. They become opinion leaders and through word-of-mouth disseminate information to the less informed people. The personal and non-personal channels include the following.

CHANNELSUB-CHANNELSCONSTITUENTS

PersonalAdvocate channelsSales people. Social workers.

Expert channelsProfessionals (Doctors, Bank manager)

Social channelsNeighbors, friends, family members and

associates

Non- personalMediaPrint, TV, radio. Direct mail, websites,

Hoardings, posters

EventsSports, music, festivals, melas,

jataras, Haats.

Personal Channels: Personal influences have a significant role in the rural markets. Here buyers are less exposed to media, and more community bonded. They sock opinions before

making final decisions. Companies can activate several sources to influence rural

consumers. Distribute products through retail outlets, which facilitate interaction.

Create opinion leaders by supplying certain people with products on attractive terms, or work through community influential such as local political leaders, doctors,

teachers, etc. Develop advertising that has high conversational value or interactivity.

Train middlemen in interacting with consumers.

Establish Tele links for online transactions.

Distribute products for interaction: Companies are realizing that distribution is not an exercise in mere physical placement of products. It goes beyond; it needs to be animated by people and atmosphere. Distribution will be effective when the consumers:

I. Find the outlet a familiar place for a confident entry.

AI. Find the ambience appealing being compatible with their style of living and reflects their aspirational needs.

BI. Find the interaction with the retailer and his personnel pleasant and helpful.

MAL (Maharaja Appliances Ltd.) launched its campaign Bonus a range of home appliances to cater to the needs of rural consumers. The advertising outlay cost Rs. 2 crore. It was spent mainly on wall paintings, in-shop posters and dailies. The advertising was extremely specialized as the products were to be sold at Kirana stores, instead of large intimidating showrooms. The importance of such strategies are that a close connection with the villagers, needs and preferences are more likely to be established if the local vendor of vegetables and the like pushes the brand. Continuous interaction will allow the vendor to gauge the response to Bonus.

Create Opinion leaders: Social norms and mores impact the rural consumers in ways different from their urban counterpart. It is found that decisions are mostly opinion- driven. They value social conformance in their decisions. As they live in communities, they prefer to have social sanction for their actions. That is why there are brand villages- Escort village.

Nirma villages, etc. Wisdom of the elders, suggestions of the leaders, and advice of the educated are sought with high regard by the rural consumers. As such, the Panchayat head, the school teacher, the doctor, and elderly persons play a crucial role in the decision making process. Accordingly, some companies have started giving more importance to positive word-of-mouth campaigning through opinion leaders.

When Asian Paints launched Utsav range during the pre-Diwali season, the salesman selected the opinion leaders in villages and painted the village post office or library or the house of the mukhiya to demonstrate that the paint does not peel off. Moreover, the salesman organized meets at the local dealers, where the village painters were invited.

The Reckitt & Colman (India) has tied up with non-government organizations (NGOs), which, in turn, educate consumers about the hygienic aspects of Dettol vis--vis haldi.

Advertising with interactivity: Advertisements in newspapers and magazines have limited value in rural areas. More than the radio, TV can impact rural audience by its audio-visual effects. Compared to these ads, live demonstrations, programs like story telling (Harikatha, Burrakatha, etc) or skits will be more powerful media as they provide scope for direct interaction with the audience.

Brooke Bond Lipton India Ltd . (BBLI) started an all India campaign . To build awareness for its Kadak Chhap tea it added local flavor to its campaign. A local magician was brought in to deliver the message under the garb of a skit. An element of interactivity was added to the skit with one of the local boys enacting the role of the underdog Nathoo, who kills the evil guys after he has had a strong cup of Kadak Chaap. At the end of the shows everybody is given a sample pack.

Train middlemen: For a company to stay in the forefront. Its representatives should be strong communicators. Their ability to inform and convince the consumers is significant as the rural consumers are increasingly exposed to as many brands options as the urbanites but with less education less media exposure and less experience Measures are

necessary to improve among middlemen the knowledge of products and skills of persuasion.

Usha conducts biannual dealership conferences and workshops. Corporate Vision in New Delhi, an outfit that trains sales force for companies like Hero Honda, Indo National that are limbering up for a grand rural assault. They advocate the way sales team approach the rural market.

Tele links for online transaction: The information revolution is also sweeping the countryside. The remote rural villages scattered far and wide are now being Tele linked with the world. Villages are becoming netizens. Companies are talking an advantage of this new proposition.

In one respect Aragonda is a village like most others: disease is rampant and health care facilities are practically non-existent. In March 2000, the health care tycoon C. Prathap Reddy, Chairman of the Apollo Group of hospitals set up a Rs. 10 crore, 50-bed multi-specialty rural hospital there with the countrys first Tele medicine center at a cost of Rs. 17 lakhs. Now diagnosis and consultation are available to patients in villages at the same speed and cost at which it is offered to the city dwellers.

Non-Persona, Channels: When it comes to selecting a media, one has to keep in mind that mass media reaches barely 30 per cent of the rural audience. It makes little sense to use this to reach out to the rural consumers, unless it is used as a supplementary tool . Infact, the m aj or sour ces o f i nform at i on gat hering and entertainment for the rural consumer continue to be local events and the best way would be to physically reach out to them by becoming a part of their daily life. Companies that have attempted to use local idioms to convey product message in a meaningful context had more success.

For its Tiger brand, Brooke Bond Lipton India Ltd. Often creates Sherdil Jawano Ka Adda within its stalls. The Adda offers the local men a chance to test their strength at the grip machine. To increase the traffic to the stalls the decor is changed regularly. Company hires announcers to lure villagers by offering special price-off, discounts and tree gifts.

(g) Deciding on Promotion Mix: Besides advertising, a company may utilize one or more of the

promotional tools. For example, sales promotion, direct marketing, publicity and personal

selling.

(i) Contests and Demonstrations:

In 1991, TVS made its moped TVS-50 XL more powerful. To demonstrate this, and to get the maximum number of people or to a TVS-50 XL, a contest was held. The XL managed to carry 19 people, a payload of over 1000 kg and still able to run. TVS used this as a road show in many villages, to demonstrate its load bearing capacity. Ambience (ad agency) created a commercial on this.

(ii) Sampling: Generally, people tend to be conformists. The propensity to try a new product is less among people, particularly in the rural areas. Besides Advertising, there should be some promotional measures to induce consumers to buy the products. Sampling as a promo tool does this job. While advertising creates awareness, distribution of samples achieves both brand awareness and conviction.

The efficacy of sampling in rural areas is, however, debatable. Marketers have varied experiences and different opinions. They are summarized here:

AGAINST

Conversion lags: Conversion does not take place easily and immediately. It is a long process. A case in point could be Kelloggs, which took .1 long times [0 convert urban dwellers to take to breakfast cereals. So, one can imagine the time it would take to convert rural folk to brands.

HLL in its operation BHARAT project supplied hampers for Rs. 5, 10, 15 and 20, each of which had a Clinic Shampoo bottle, a tube each of Pepsodent and Fair & Lovely, and Pond's Dream Flower talc, in different sizes and combinations. It presented solutions to hair care, dental care, skin cares and body care. As many as 160 vans were employed but the operation did not add new users as HLL had envisioned.

Brand registration: The purpose of sampling is not brand sales. It is brand registration. Brand registration is vital in the rural perspective because it may then spread to other products under the same brand umbrella, such as Clinic Plus, hitching a ride on the benefits awareness of Clinic shampoo. Sampling goes a long way in the registration of the brands the minds of the rural folk.

Brand Conversion: With more number of brands competing for the attention of rural consumers. Conversion to a better brand in the same category is a rather difficult

proposition. So sampling isperhaps theonly waytoachieve this conversionthe

expected immediate effectof sampling,therefore,isbrand registration. Eventhis

requires the support of sales promotion measures to make the brand a talk of the village.

HLL, for Lifebuoy, integrated a value proposition by distributing height charts to about 9000 schools and Laxmi calendars to 18,000 shops in as many as 4000 villages to make every one talk about Lifebuoy. The height charts were added to attract younger generation, the decision-makers in many a rural household.

(iii) Installment Schemes: Rural consumer would not have much use for a monthly installment finance scheme as in an agrarian economy, income is generated primarily at harvest time. However, there are some success cases.

In 1990, the price of the moped TVS-50 XL was around Rs. 8000. At that time, consumer finance schemes were not widely available. In the rural areas, the financier was the local moneylender who charged exorbitant interest rates. Seeing that, TVS introduced the Rs. 399 scheme. This was the first time that a vehicle was available on installments of Rs. 399 for a 24-month period. It appealed to the rural, customer because he could now buy a two- wheeler at a down payment of less than Rs. 400. There was a spurt in sales from 6000 units a month to 10,000 units per month. The company also roped in local moneylenders to act as financiers for the moped. TVS charged an interest rate of 14 per cent, while the moneylenders could arrange upto 18 per cent. The only stipulation laid down by the company was that the initial amount could not exceed Rs. 399. The scheme continued and in 1998 the installments were raised to Rs. 666 per month.

This view is gaining strength with increasing competition among companies and the growing power of retailers. They are finding it difficult to retain shelf space and displays in the retail outlets the current view as such, is:

"If you depend entirely on your wholesalers now, you are bound to lose your market to the competitor. There is no substitute for stretching direct communication to the farthest".

In the rural context, personal one-to-one communication is effective. Such relations can be established through sales persons and mailers. Brushing aside wholesales and dealers, companies now have "direct points of contact" with retailers and sub-retailers.

Videocon is focusing on making its presence literally felt in the villages. The mechanics of the company, take a round of the villages twice a week to assure the villagers of after sales service as an important component of consumer durables For this purpose, the company employed 1800 engineers.

(h) Communication budget: There should be an objective analysis of the goals and tasks of communication for determining the size and allocations of budget. The rural advertising budget of companies is generally between Rs. 6 and Rs. 15 crore. Though it does not seem much, according to an expert, Rs. 10 crore spent in the villages achieves the same visibility as Rs 50 crore in the towns and cities. MNCs like Samsung are spending Rs. 40 crore on advertising in semi-urban areas.

7.3 DISTRIBUTION STRATEGY

Many companies view the rural markets as great opportunity for expanding their sales but find distribution as a major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban markets onto rural markets, namely, extensive retailing and sustained pull generation through mass media advertising.

The road blocks to reach the rural customers are: Lack of adequate transport facilities.

Large distances between villages.

Lack of pucca roads connecting villages to nearest townships.

Lack of proper retail outlets

Lack of mass media infrastructure.

The marketers were of the opinion that the villagers would come to nearby towns and buy the products that they want.

What has been found is that if we have to serve the rural consumer we will have to take our products to him through the channels that he is using and some innovative ways of getting to him.

7.4 THE OLD SETUP

The historically available people & places for distribution include: - Whole seller, Retailer, Vans, Weekly Haats, Bazaars.

1. Wholesalers: The Indian wholesaler is principally a Galla Kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character. He is a trader / commodity merchant rather than a distributor and therefore tends to support a brand during boom and withdraw support during slump.

The reason for this speculative character and dormant role of wholesalers are: - Indian market was largely sellers market. There was no need for active sales growth.

Companies laid more emphasis or retailers in urban areas, who are very large in number. As a result of retail based distribution was weakened.

Rural markets were neglected by many. The occurrence of retail outlets was low. Therefore many companies were dependent on wholesalers.

The current need is to activate and develop wholesaler of the adjoining market as a distributor of products to rural retail outlets and build his loyalties to the company.

2. Retailers

Village retailers have traditionally been among the most mobile of rural residents. Often doubling up as money lenders.

Their multi person interaction in the closed village society. As result retailers play a significant

role.

I. Credibility: -

He enjoys the confidence of the villagers. His views are accepted and followed by the rural people whose awareness andmedia exposure levels are low. The urban retailer is not trusted.

He is seen as a businessman with profit motto.

His view points are evaluated with other sources of information.

II. Influence leader: -

His role as influence leader is indisputable. From tender twig of neem to washing powder retailer testimony has been vital part of the product adoption process.

The role of urban retailer is weak.

The urban consumers have numerous sources of information.

Although retailers opinion is sought it may not be 100% believed and followed.

BI. Brand promoter: - In rural market retailers remains the deciding factor to sell particular brand.

Retailers helps in identification and selection of brands, there is less influence of shelf displays and point of purchase promotion.

Presence of spurious brands is an ample testimony to this view.

The urban retailer has a limited role as a brand promoter.

He cannot directly, recommend the brands.

He is to intelligently drive home his recommendations, as urban consumers do not trust him completely.

It is through shelf displays and incentive offers that he has to push the brands.

IV.Relationship marketer: - Village retailer practices relationship marketing.

He caters to a set of buyers who have income from immovable land resources and would be static over a much longer time span.

The relationship could extend beyond three generations, backed by historical

credibility of the retailer as a product referral.

On the contrary, the urban retailers have to make an effort to adopt relationship marketing.

His customers base comprises largely the mobile service class prone to shift residence at least once, if not more, in less than a decade. This limits the time span and

perspective of the retailer customer relationship.

V. Harbinger of change: -

In an environment relatively isolated from external developments, he has been harbinger of change.

He is one of the main sources of information and opinion as well as supplier of product and services.

3. Vans: Mobile vans long since, have an important place in distribution and promotion of the products in villages.

JK Dairy launched whitener Dairy Top in small 50 gm. sachets priced at Rs. 6.50. It decided to make a concerted foray into rural India in 1996. It hired vans to penetrate the rural interior, each van traveling around 125 km a day, 25 days a month.

4. Weekly Haats & Bazaars: The haats are the oldest outlets to purchase household goods and for trade. These markets are very well organized with shopkeepers having pre-assigned spaces for them to sell their wares. A typical market is in an open field with ample space for displaying all sorts of goods. Its location changes every week. These markets have different names in different regions. But they are strikingly similar in what they sell. It is reported that there are, in all, about 47,000 haats held throughout the country.

Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices.

Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect

of transactions, it is an attractive place to those who want to buy second hand durables and to those who prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and week-long hard working rural folk.

Availability: It is a market for every one and for everything. Household goods, clothes, durables, jewelry, cattle, machinery, farming equipment, raw materials and a host of products are available.

5. Melas and Fairs

This is another low cost distribution channel available to the marketers. It is comparable with urban events like Wills Trophy, India International Trade Fair (IITF), Sajavat or Consumex in which audience participation varies from a few thousands to a few lakh people. These melas are ancient and part of Indian cultural heritage.

The Janpad Pradarshani aur Pashu mela, held every year at Etawah in Telangana first took place in 1899, after which it was discontinued for want of patronage. It received a fresh lease of life in 1910, with grants and donations from local residents. Close to Etawah is Bulandshaar where Zila Krishi Udyogik Pradarshini is even older; it was born in 1881, as the imperial show under the aegis of then British Collector.

Most of the fairs are associated with either a religious event or a festival. Among the most famous melas is the mighty Kumbh Mela at Allahabad (Triveni Sangam), Pushkar mela in Rajasthan, Kullu Dusshera mela in Himachala Pradesh, Sonepur mela in Bihar and Makar Vilakku in Kerala. People from all over the country gather to taste the wonders of India. According to the Indian Market Research Bureau (IMRB) around 8000 melas are held in rural India every year. According to Rural Scan (Quarterly Newsletter by MICA (Mudra Institute of Communications, Ahmedabad), there are on an average, 1000 melas held in a state annually. The average duration of a mela is anywhere from one to 45 days.

The interesting questions are: Do these meals provide an opportunity for sales? How are they organised? At a mela there can be as many as 854 stalls. Some 18.4 per cent of these are local

stalls (belonging to a few hundred villages), 40.8 per cent are regional (they belong to a few districts) and 40.8 per cent are national.

An interesting statistic is that the share of manufactured goods at melas is around 42 per cent. Like urban events these melas need little or no prepublicity. They have come to occupy a firm position in the rural calendar of festivities. Most of the fairs are associated with a religious event or a festival. As with religious events, the dates of most fairs are determined by the Hindu calendar, not the Gregorian one. Most fairs are expressions of local need to celebrate. A villager, who has attended it since his childhood looks forward to it months in advance.

A majority of the melas are held during October-November and January-April. This coincides with the Kharif and Rabi harvests when the farmer's purchasing power is high. With both money and leisure at hand, he is inclined to indulge his family with a day out at the mela. He also looks forward to updating himself on the latest farming practices and on consumer goods. Visitors to fairs are thus highly receptive to try out new products and also come with enough money to do so.

7.5 THE NEW PLAYERS

Selling in rural India followed a pattern, till recently. But with the entry of new players, and the surge in rural demand, the structure and dynamics are altering.

1. Unofficial Channels

Consider Hero Honda Motors. Its 360 dealers all over the country has reported the emergence of an unofficial channel of distribution village mechanics, local real estate agents, shopkeepers who sell non-durables and so on. These people are taking motor cycles from the official dealers usually in twos and threes displaying them outside their premises and closing a sale. The paper work, though, is left to the dealer to complete.

2. Cooperative Society

Cooperatives occupy an important place in India's rural economy, in terms of their coverage of population and their share in total supply of agricultural inputs, including credit.

India can rightly claim to have the largest network of cooperatives in the world. By 1994, there were 3.95 lakh cooperatives. Cooperatives in 1999 account for 62 per cent of the total credit supplied in rural areas and 34 per cent of total quantity of fertilizers distributed in the country.

Rural Scan reports that there are 4398 Primary Marketing Societies and 2933 Large Agricultural Multipurpose Primary Marketing Services (LAMPS) in the country. Other members are:

Generally, a cooperative exist for 2 or 3 villages. Farmer's Service Cooperatives (FSCs) is a mini super market. Such an arrangement can be tried with others.

3. Public Distribution System (PDS)

The Fair price shops run by government can be utilized to sell consumables and low value durables.

4. Petrol Pumps

Petrol pumps have become multi-purpose distribution centers at some places. Such concept can be effectively promoted.

5. Agricultural Input Dealers

Fertilizer companies have retail outlets within a range of 5 km to any village. They offer a scope for marketers.

6. NGOs

Another alternative is working with Non-Government Organizations (NGOs), which reach interiors of villages. Ideologies and methods may vary but most NGOs have programs focusing on sustainable development through providing avenue for income generation. They command substantial influence where the programs are implemented. Companies may join hands with them to mutual benefit. With NGOs undertaking distribution,

companies realize benefits accruing from infrastructure and grass roots level networking. Also organization security would provide a buffer against delayed retail collections. From the NGOs standpoint, such association with companies could yield employment opportunities for local residents.

7. Barefoot Salesmen

Companies may train sons-of-the soil to operate as barefoot salesmen. Fluency in the local dialect and familiarity with persons and terrain in the area of operation would be among the factors enhancing the efficacy of this approach.

A barefoot salesman, operating on a retailer-cum-commission basis, could book orders from retailers in villages within a limited radius of his village. On aggregating orders, which permit distribution economies, he could coordinate with the area stockiest to arrange deliveries and make collections.

8. Syndicated Distribution

A viable and novel approach to reach the rural markets is syndicated distribution. Under this approach, marketers of household products could group together and consider the formation of a syndicated trading organization which could jointly distribute a collective group of household products in the rural market and enjoy shared economies. The guidelines for formation of the syndicated organization may be as follows:

Guidelines: Companies willing to work together may contribute to the capital of the organization.

It could be privately held and need not be open to the public or government agencies.

The distribution by this organization may replace or supplement the existing distribution.

A formula for expense sharing is to be worked out in advance by the participating organization.

7.6 NEW APPROACHES

1. Distribution Trends

The changes in distribution are not only baffling but also challenging.

Element of salesFromTo

TimeRestricted, limited timingsUnrestricted, anytime

PlaceOwn retail outlet,Anywhere

occasionally public place

Any product to all

ChoiceLimited to brandsspecification, unlimited

choice

SalesProductsProducts, experience

relationships,

ResultCustomer satisfactionCustomer participation

and satisfaction

2. Direct To Home Selling Companies are embarking on Direct To Home selling (DTH) even in rural area.

It provides one to one communication as well as sales without reliance on retailers.

The 2 forms of DTH are: -

(a) Network Marketing

(b) Internet Marketing

(a) Network Marketing: - is a form of direct selling. It can take place at 2 levels.

Single level distributor appoints sales persons. He earns profits on sales, made by him.

Multi-level distributor introduces another distributor (a friend or relative in general) who in turns introduces another distributor.

Like that the network is created. The Network markets products. Each distributor gets profits on his sales and also a percentage on sales made by his Network. Thus one earns by

Retailing and Recruiting.

The Rural Applicability: -

The introduction of network marketing in rural markets will be beneficial not only to the companies but also to the villagers. HLLs project SHAKTI is adaptation of network marketing.

(b) Internet Marketing: - Although at present due to low penetration of Pcs it is not a viable media. But some agencies and companies have started using this medium in a collective way to distribute information and products.

3. Relationship Marketing: - HLL

HLL is involved in building relationships with the customers in rural areas through education programs, home to home contacts and cinema shows.

Focus: The objective in rural areas is to tap first time users. Statistics indicate low usage

patterns.

In China 90% of the people use toothpaste compared to 47% in India.

Only 20% have visited a Dentist.

About 27% use toothpowder.

Even urban areas where majority of people use toothpaste right from childhood, the overwhelming majority uses toothpaste only once in the morning whereas teeth required brushing most at bedtime.

Strategy

(a) Product: - HLL has introduced a 15 gm. Pepsodent pack to target the first time user.

Close up is introduced at retail outlets in suburban and rural areas with a price tag of Rs. 3.50

(b) Campaign: - the operation, bharat program. HLLs door to door campaign in rural areas concentrates on educating the consumer by holding free dental camps. In India there is scholarship for students in dental colleges for collaborating in research at such centers. Dental check-up camps are conducted in schools. A rural hygiene program a counterpart to urban is to cover 350000 villages and has target of reaching 20 crore people.

(c) Door to Door sales: - in this HLL is selling a discounted personal care kit containing mini-packets of shampoo, toothpaste, talcum powder and face cream. The kit is sold at Rs. 15, Sold separately the products would together cost Rs. 27

(d) Cinema: - after home to home contact and sales in villages during the day, HLL concentrates on cinema time in the evenings. There are still villages which do not have TVs; hence cinema shows are quite popular.

7.7 COMPARISON OF RM, NWM & IM

AspectRELATIONSHIPNETWORKINTERNET

RMNWMIM

SellerCompany or itsConsumersCompany or its

agentsDOT.com agents

Role of consumerBuying andBuying, evaluatingBuying and

evaluatingand sellingevaluating

Foster relationship &Strengthen

Focusrelationships ofTo be built

loyalty

consumers

Products,ProductsProducts

SupplyExperiences, choice

Experiencesachievements

conveniences

Browsing experienceLimitedLimitedUnlimited

ChoiceLimited to brand orLimited to brand orAny product

categorycategorycustomization

TimeFixed and limitedFlexible, but limitedAny time

by convenience

PlaceRetail outletsAny whereAny where

CostHighLowlow

8. PRODUCT STRATEGY

The central decision in marketing mix is product decision. Product classifications: -

(i) Based on Tangibility Products

Services

(ii) Based on the purpose of use

PurposeTypeUserProducts

Toiletries,

ConsumptionConsumerHouseholdCosmetics,

GoodsBeverages etc.

ProductionIndustrial /Industries FarmRaw materials

Agricultural/ poultries etc.components, agricultural

Goodsinputs and machinery etc.

(iii) Basedonthefunctionallifeoftheproduct

TypeNature of useFunctionalExample

Life period

ConsumablesOne timeShortFood & beverages

Furniture,

DurablesLife timeLongComputers, cars and

cameras

(iv) Based on habits

3 categories based on shopping habits: -

Buyer involvementBuying place

GoodsProduct Type/ frequency / buying

decision

Paan shop,

kirana shop,

ConvenienceConsumablesLow / frequent /Cooperative

Goodsstores, fair

simple

price shops,

fairs & mandis

Shopping goods

(clothing,

furniture,DurablesModerate / occasional /Fairs, haats,

homemandis & shops

complex

in feeder towns.

appliances etc.)

Speciality

Goods (camera,DurableHigh / Once in life /Shops in towns or

two wheelers,complex

cities

tractors etc.)

(v) Based on the price and quality

2 types of goods are identified: -

(a) Mass product (cheaper and economy goods)

(b) Premium product (superior goods)

Cheaper goods are those, which are characterized by, low quality and low price. They perform core functions but lack certain attributes, which make their use less comfortable, less pleasant and less desirable. E.g. Nirma washing powder is cheap good.

The package is poor. Powder spills over. When the powder is mixed in water, burning sensation is felt in the skin and palms.

Economy goods are products with all necessary functional features but no fancy features. Its price and quality are fairly reasonable. In case of durables, its operating and maintenance expenditures are low. As such, they are money savers while being needs e.g. TVs without remote etc.

Premium goods are such products, which appeals to the ego of the buyer. They are described as, goods for premium consumption. E.g. Jewelry, cars etc.

(vi) Based on product development Innovations

Imitations (novelties, copycat)

Innovations: - innovate products rule the market. An innovate firm will surely succeed. However, it should be careful in making technical innovations in tune with changing market behaviors.

Imitations: - imitations may result in two types of goods depending upon the purpose, commitment and competence of imitator. A poor imitator will end up in producing deceptive, spurious, fake copycat products.

(vii) Based on brand hierarchy level

There are 5 levels of products based on branding.

While urban market is exposed to the 5 different brands, rural market is now finding the national and global brands at their threshold and doorstep.

Global brandsPepsi, Coke, LG, and P & G

National brandsGodrej, Tata

Regional brandsSun TV Channel

Local brandsSurya Masale, Joy Chips

Unbranded productsOil, Food Grain, Tongue Cleaner

CommoditiesTamarind, Cloves, Fish, Eggs

8.1 CONCEPT AND SIGNIFICANCE OF PRODUCT STRATEGY

Product strategy refers to the long range competitive plan involving decisions on: -

Products

Product line and

Product mix

An effective product strategy offers the following benefits.

(i) Achieves Product Market Fit: -

A well thought out product strategy will be able to offer products based on market needs. Thus, it achieves product market, fit and avoids the pitfalls of marketing myopia consequently it provides insurance for survival.

(ii) Encourages Innovativeness: -

The key to product strategy is innovation with a view to fine tune the market offer to the current and future needs of consumers.

(iii) Provides Competitive Edge: -

Marketers need good intelligence on how to anticipate competitive moves and launch their new products. Companies will have to use product strategy to attack their competition depending on their positions and Wage guerilla warfare.

(iv) Makes Better Use Of Resources: -

The product additions and deletions, based on rational appraisal of marketing and productions strengths and weakness. It allows for better utilization of physical, financial and human resources.

SCOPE

Product strategy embraces decisions a 3 level.

Product mix Product line Product item

Productstrategies anoverview

LevelStrategy

Width extension new product lines

Product mixLength extension new product items

Depth extension new product variant

Stretching upward, downward, both ways

Product line

Line pruning

Quality, features, design brand and package

Product itemAugmentations

Product line is a group of closely related products priced within a range and distributed through same channels to the same customer group. It has two dimensions: -

Length

Depth

Length refers to the total numbers of items in the line.

Depth is the total number of product items.

1. Length of product line: -

How long should be the product line? It is like asking how long should the legs be? The reply to this question is: - long enough to reach the ground.

Similarly, product line length should be evaluated in the light of company profitability. If profitability can be increased by dropping items, the existing length is more than necessary. If profitability can be increased by adding items, the existing length is short. It should be neither too short nor too long.

Arguments in favor of short and long lines are summarized below: -

Short lineLong line

When focus is onIf companies want to be positioned as full line

Specialization.companies.

As a consequence ofAs a result of flanking strategy

contraction

defense strategy

If profitability isIf market growth and

the objective

Market share are the objectives.

When line pruning is done.Product line proliferation

Loss making products are

Dropped.Zealously new products are added.

Line stretching: - is lengthening the product line beyond its current range.

The stretch can be in 3 directions: -

Downwardadding lower end items.

Upwardadding high end items.

Both waysadding items at both higher and lower ends.

Reasons: -

Reaction as a reaction to competition, innovative product items are added.

Opportunity to utilize the existing market gap, new items are introduced.

Image to have a full line company image, rolling upward or downward or both ways is done.

Pressure yielding to pressure of sales force and dealers, new product items are introduced.

Strength to use the excess capacity, line stretching is done.

Desire to fulfill the desire of top executive or product manager, to introduce a new product item, line stretching is done.

2. Line Pruning: - product lines tend to lengthen over time. Sometimes they are stretched on rational grounds at other times; they are lengthened because of emotional reasons. In either case, some dead wood will accumulate.

It is weeded out based periodical review of the contribution of product items. The product items can be classified as: -

(i) Traffic Builders: - which attract customers but generate marginal incomes.

(ii) Bread Winners: - which generate major share of incomes.

(iii) Parasites: - which incur losses and depend on bread winners

Product line pruning may be done when

It is identified that dead wood is depressing profits, and

It is found that the production capacity is limited and cannot handle all the existing products.

E.g. HLL has pruned 80 strong brands, portfolio to the 30 power brands, which account for 75%

of its FMCG turnover.

3. Line Modernization: - when technological developments change the products, a decision to

revamp the old line and design a modern line become inevitable.

The aspects to be considered are:-

(i) Timing: it should not be too early or too late. The timing decision requires information about

Conversion readiness of consumers from old or new products.

(ii) Approach: whether the change is total or piece meal?

The merits (+) and demerits (-) of these two approaches are given below:-

TotalPiece-Meal

- requires heavy cash flow+ less draining on companys cash flow

+ surprise competitor no chance to imitate- allow competitors to see changes & start

designing their own time

- implementation to change involving dealers and+ people affected by change easily understand

customers is difficultand adopt

CASE STUDIES

COCA COLA INDIA

The Coca-Cola Company is the global soft-drink industry leader, with world headquarters in Atlanta, Georgia. The Company and its subsidiaries employ nearly 30,000 people around the world. Syrups, concentrates and beverage bases for Coca-Cola, the Company's flagship brand, and over 160 other Company soft-drink brands are manufactured and sold by The Coca-Cola Company and its subsidiaries in nearly 200 countries around the world.

During the past decade, the Coca-Cola system has invested more than US$ 1 billion in India. Coca-Cola is one of the country's top international investors. In 2003, Coca-Cola India pledged to invest a further US$100 million in its operations. Coca-Cola business system directly employs approximately 6,000 local people in India. In India, it indirectly creates employment for more than 125,000 people in related industries through our vast procurement, supply and distribution system. Virtually all the goods and services required to produce and market Coca-Cola locally are made in India. The Coca-Cola system in India comprises 27 wholly-owned company-owned bottling operations and another 17 franchisee-owned bottling operations. A network of 29 contract-packers also manufactures a range of products for the Company. The complexity of the Indian market is reflected in the distribution fleet, which includes 10-tonne trucks, open-bay three-wheelers that can navigate the narrow alleyways of Indian cities, and trademarked tricycles and pushcarts. The Company ranking up "firsts" in the introduction of canned and PET soft drinks, vending machines and backpack dispensers for crowds of cricket supporters.

A common trend that is seen in the promotional advertisement campaigns of soft drinks, is the presence of popular film stars and celebrities right from Amitabh Bacchan, Sachin Tendulkar, Shahrukh Khan for Pepsi, Hritik Roshan, Aamir Khan, Aishwarya Rai, Sunil Gavaskar for Coca-Cola, Salman Khan, Sushmita Sen for Thumps-Up to sonali Bendre for Limca, the trend continues. This is probably because the Indian consumers are very influenced by film stars and are big cricket fans and marketers still prefer to rely on building top-of-the-mind advertising.

Also, most marketing people tend to get evaluated on parameters like brand noticeability and brand preference. That is why most of them eventually fall back on celebrity driven advertising, which quickly improves noticeability.

As 30% of Coca-Colas sales comes from the rural markets where the potential for growth is still high compared with a relatively saturated urban market, the company wanted a separate rural strategy, hence the Aamir Khan-featured commercial Thanda Matlab Coca-Cola ( a campaign that immediately provoked a retaliatory campaign from pepsi staring Rahul Khanna and

Fardeen Khan ). The Thanda. campaign was conceived during a brainstorming session when someone pointed out that thanda (cold) is the soft term for soft drinks in local parlance especially in the rural and moffusil areas. This campaign intends to push the recently introduced 200ml Coca-Cola pack which is increasingly becoming accepted in rural areas.

Coca-Cola has however undertaken a different set of advertising campaigns in the Southern market (as the south is a big cola market). The four southern states are in really different countries. For example there is a promotion going in the North which will start soon, it will not be implemented in Tamil Nadu or Kerala where they will have their own promotions. The things that work well in the rest of the country do not work well in Tamil Nadu, Kerala or Andhra. For example when they did tie-ups with movies like Hum Saath Saath Hain and Kaho Na Pyar Hai, starring big names from Bollywood they didnt do well in Tamil nadu nd all the activities they did around these movies, also didnt fare well. The people here do not relate to these stars. In

Tamil Nadu it is always believed that movies and music have a large following. The trend is similar throughout the country, but accentuated more in Tamil Nadu. If you take the case of Vijay, when Coca-Cola finished the ad, many of his fan clubs came and took his Coca-Cola posters to be displayed at vantage places in and around theatres screening his recent movies.

TATA SALT

Tata Chemicals salt story began in 1983, when it needed fresh water for the boilers that produced soda ash at its Mithapur plant. Fresh water was scarce, so the company set up a process to generate it by using seawater, a freely available resource. Salt, of high quality and purity, was a by-product. Both UNICEF and the Indian government were promoting the intake of iodine for health reasons. Salt is the most economical and convenient dietary vehicle for iodine consumption. Hence, these factors led Tata Chemicals to take up salt production. Ever since its launch in 1983, Tata Salt has been synonymous with iodized salt in India.

The positioning statement used earlier was Namak ho Tata ka, Tata namak." The communication was built around the fact that Tata Salt, Indias first iodized salt, was manufactured by a Tata company.

Tata appreciated that in order to sustain a competitive advantage over a long period of time, what is needed is for the consumer to perceive the company to be different from others. The best way to differentiate is to connect with the consumer at an emotional level.

The challenge was to take purity, a rational product benefit, and create an emotional link with the consumers. A new agency, Bates India, was chosen to work on the communication. A strong fact that emerged from the research was that consumers were troubled about the gradual erosion of nations value system. Another factor was that salt is deeply rooted in grassroots values.

Tata salt spends about 15-18% of their sales revenue on promotion. The promotional strategy used by Tata salt is Pull Strategy. It is based on the Brand equity appeal and Tata brand name.

Tata Salt is Indias fourth most trusted brand. This was highlighted by the study of reputed

Market Research Agency A.C. Neilson.

Tata Group follows the policy to give returns to the nation. Therefore, along with the Desh Ka Namak ad they came out with the Desh Ko Arpan programme last year in 2002. The company

decided to contribute 10 paise on every packet of Tata Salt which is sold between August 15 and September 15 2003 and also January February 2004, towards the education of deprived girl children. The Desh Ko Arpan programme encouraged ordinary individuals to make a difference. Over Rs 35 lakh was collected in 2002 and given to Child Relief and You through this initiative. The Promotional tools adopted by the company include advertising and sales promotion.

Advertising:

The amount spent on advertising accounts for 7 to 8% of the sales revenue. They use mass media communication like Television Ads, Print Ads, etc.

Print Ads:

They are printed in regional language newspaper and in the magazines in the regional language.

Like, The Desh Ko Arpan Programme is been promoted through print media advertisements in 5 regional languages (Hindi, Marathi, Bengali, Tamil and Telugu).

Media Vehicles

Conventional Media-

(a) Television: For rural market they dont have a separate advertisement but they play the same advertise in the regional language.

Doordarshan- Tata Salts around 40% reach is because of its advertisements on Doordarshan.

It also advertises on Star Plus, NDTV, etc.

Regional Channels like- Alfa, Sun, Surya, etc. depending upon the State Language.

(b) Wall paintings: They also communicate to rural market through the wall paintings in Haats. Urban consumers shop daily and have 365 opportunities a year to switch brands while the rural

purchasers who buy their goods in weekly haats have only 54. Considering this Tata Salt makes ultimate use of this opportunity to educate the customers about the product.

(c) Video on Wheels: Tata Salt uses van marketing to reach the satellite villages.

Non-Conventional Media-

Kalnirnaya: Tata Salt advertises on Kalnirnay Calendars w